Optimism up for CFOs at mid-size retail, wholesale

In the last six months of 2012, CFOs in mid sized companies in sectors including wholesale, retail, property and transport were among the most optimistic, in contrast to some of their larger counterparts, according to a bi-annual survey of finance bosses.

“You hear a lot of negativity attached to retail,” says GE Capital’s head of commercial finance, Aaron Baxter. “But mid market retailers have been early adopters of the omni channel strategy; those guys have done a nice job to integrate digital concepts.

“They’re smaller businesses, that are able to flex to different consumer sentiment.”

The wholesale sector has had the biggest turnaround in growth expectations from six months ago when it was suffering the most along with manufacturing and the construction sector, which continued to be among the most gloomy.

By contrast, some of the better performers a year ago declined over 2012, including mining and mining services.

Overall the GE Capital Mid market Survey of 5000 CFOs found a slight tick up in optimism at the end of 2012, with signs finance chiefs are looking at longer term growth strategies again, but the trend in optimism about the future is still well below levels when the survey began in late 2009.

Since April 2012, the top concerns for companies has remained the economy, cutting costs, growing revenue and managing cash flow.

The report said that capital resourcing, including managing cash flow and access to finance, has become more important than talent management for the first time since mid 2010, which indicated more were thinking about how to finance growth.

“There is a growing gap between concerns about managing costs compared to maintaining and growing revenue. The position of these two measures is key to the overall health of the mid-market,” the report states.

“Other top concerns relate to indirect barriers to growth, such as government regulations and interest rates, and external growth opportunities such as marketing and competition. These are all beginning to rise as concerns among mid-market CFOs.”

But most mid sized companies were still cautious on loading up on debt, with about 20 per cent of mid-sized businesses expecting to borrow more in the next 12 months and a third planning to reduce debt.

“This makes the mid-market more debt averse than the large sector, where 27 per cent of CFOs said they intended to increase their debt and 20 per cent were preparing to de-leverage.”

Baxter said the transition to longer term debt occurs in mid-size companies.

“At the low end of the mid market ($10-50 million annual revenue) appetite for debt is relatively cautious,” he said. The sort of debt they will use is mostly short term.

‘For companies between $50-250 million [revenue] they are looking to access longer term capital - they might be thinking about acquisitions, updating production or [buying] more physical assets.”